CBO Says Federal Budget On Unsustainable Path (Is Anyone Surprised?)

I‘m not sure how often everyone has to be told, but here’s the warning again, just as Democrats attempt to pile another trillion plus dollars in federal health care spending (and debt). From the CBO Director’s blog:

Under current law, the federal budget is on an unsustainable path, because federal debt will continue to grow much faster than the economy over the long run. Although great uncertainty surrounds long-term fiscal projections, rising costs for health care and the aging of the population will cause federal spending to increase rapidly under any plausible scenario for current law. Unless revenues increase just as rapidly, the rise in spending will produce growing budget deficits. Large budget deficits would reduce national saving, leading to more borrowing from abroad and less domestic investment, which in turn would depress economic growth in the United States. Over time, accumulating debt would cause substantial harm to the economy.

I’m not sure how it can be said any more clearly and more succinctly.

The choices, as laid out in the paragraph above are fairly simple – cut federal spending dramatically or raise taxes (revenues) dramatically to meet the spending or your going to do “substantial harm to the economy”. Of course we also know that raising taxes dramatically would have the same effect. That leaves one option and, as is clear with the health care reform proposals, that’s nowhere near the table, is it?

Yet that’s the formula:

Keeping deficits and debt from reaching these levels would require increasing revenues significantly as a share of GDP, decreasing projected spending sharply, or some combination of the two.

CBO offers the following graph to illustrate the point of letting the status quo remain in place. Note that the second line coming off the actual/projected line – that’s the “extended baseline scenario” where absolutely nothing is changed and the budget, as projected, is executed. Disregard the first line for the moment.

What is important is to understand this:

The current recession and policy responses have little effect on long-term projections of noninterest spending and revenues. But CBO estimates that in fiscal years 2009 and 2010, the federal government will record its largest budget deficits as a share of GDP since shortly after World War II. As a result of those deficits, federal debt held by the public will soar from 41 percent of GDP at the end of fiscal year 2008 to 60 percent at the end of fiscal year 2010. This higher debt results in permanently higher spending to pay interest on that debt. Federal interest payments already amount to more than 1 percent of GDP; unless current law changes, that share would rise to 2.5 percent by 2020.

Now you’ve heard that, in various forms for years. But what does that mean to you personally – how does one put that in terms that mean anything to a taxpayer?

The national debt incurs interest that is paid with taxes. The interest rate on US debt is projected be about 6% annually in the long run, according to the Social Security Administration’s actuaries and other such governmental budget projectors. Six percent of one trillion dollars is $60 billion.

There are 80 million payers of income tax in the US. (If that seems low for a population of 300 million remember that 47% of all “tax units”, 70 million potential taxpayers, pay no income tax or receive refundable tax credits from the government.)

Now $60 billion divided by 80 million taxpayers equals $750 per taxpayer — so each trillion dollars of the national debt costs the average taxpayer $750 per year, every year that the debt is carried, forever.

So for every trillion in debt the federal government puts us, we owe $750 per tax payer in interest alone.

Jim extends his example to what the chart above depicts:

As of the end of last year the government’s outstanding explicit and implicit debt was $64 trillion. Add another year’s interest on that, plus this year’s $1.8 trillion deficit, and we will be well over $66 trillion at the end of this year. Which creates an explicit and implict annual interest liability to just carry the debt of more than $49,000 per taxpayer.

Yet we have Joe Biden claiming we have to spend money to avoid bankruptcy – and there are people out there who believe him. As Jim points out:

As of today most of that is implicit (for unfunded Medicare liabilities, etc.) but every year from now on (as more seniors retire and start collecting Medicare, etc) more of the debt will shift from being implicit to explicit, requiring cash tax collections to pay for it.

And the same entity which has put the country in this shape running a health care system, now wants the rest of it with the stated goal of cutting costs.

If you’re gullible enough, given the facts above, to fall for that, I have to question your critical thinking abilities. In fact, you might want to consider the chart above again and pay attention to the top line coming off the actual/projected line – that’s likely what our debt will look like if you hand over health care to the federal government.

It is very close to fish or cut bait time for the people of the US – we have got to realize, very quickly, that in fact, we are on the verge of bankruptcy and what that buffoon Biden says is just abject, unthinking nonsense.

Either cut government spending – drastically – or go under. Those are your choices.

The Chinese curse is may you live in interesting times. It is unfortunate for us that we have to go through this clusterfark but the silver cloud, if there is any, is that this is going to be the last hurrah for old school tax and spend liberalism. They will be so discredited that we won’t see them in power again for another forty years or so. At least I hope.

Kyle, that was/is my hope too, and the reason I didn’t support McCain.

The central question is whether a meltdown is pretty much inevitable at this point. It goes against my natural optimism to think in that direction, but I’m coming around to it. Though the time span is unpredictable. It could be anywhere from tomorrow to twenty years from now.

If a meltdown is inevitable, then the corollary is that it should happen sooner rather than later, while there are still some people around to push the post-meltdown world in the direction of freedom, open markets, and limited government.

Of course, the risk is that a meltdown engenders some kind of authoritarian response. I don’t discount this outcome at all; in fact, I fear it greatly. But I view this risk as higher the longer it takes to get to the meltdown. If the parasitic welfare class reaches overwhelming majority status before the meltdown, that would be bad.

To be clear, when I refer to a parasitic welfare class, that goes far beyond the traditional welfare recipient. It includes corporate welfare clients, including business executives who run their business by manuveuring bureaucrats rather than trying to win in the market. It includes government employees (most of whom produce no tangible value, but do interfere with value production by others), public sector unions, and nominally private sector unions in government dominated industries. It includes so-called community organizers, diversity counselors and similar leftist-wet-dream jobs. It includes “change the world” left-oriented media types, who make a good living trying to ensure that we know exactly what they think we should know. And of course in includes politicians and their hangers-on. This list isn’t intended to be comprehensive.

I understand that some of these people think they’re working for heaven on earth. Those will be as surprised as anyone else when things melt under their feet. Others don’t give a flip what happens as long as it gives them power and/or comfort in the meantime. If they get those, they will rationalize away any facts to extend those perks as far into the future as possible, working on the principle that “in the long run we’re all dead.”

Could the voters arise from their confusion and lassitude, and put rational people in charge in time to stem such a meltdown? Well, sure, it’s not logically impossible. I’d throw my own efforts behind any such effort that has a decent probability to succeed. But it looks increasingly like a fringe possibility to me.

The debt is meaningless, because it is denominated in dollars. When the dollar becomes worthless, we have a whole host of other issues, but the debt isn’t one of them.

Of course, my 401K becomes worthless, as do my pensions so the cost of this fiasco is still borne by this “taxpaying unit” but I’m not worried about writing checks to pay my share. To my kids, I offer my condolences. I fought this every step of the way. I hope I live long enough to tell my granddaughter what this country was really like, back when it was at least half free.

It will at least be amusing to see the rage of the parasite class when there is nothing left to loot.

This is why The Clown™ has dug the hole that will make him a one-termer. He has spent too much, and he has loused up the economy even more than it was. How he did both things (one is bad enough) is why his JARs are at record lows, and will soon be below 50%.

The economy may improve, but remember how Ross Perot destroyed the GOP with his run against the deficit. That cannot be fixed, and a moderate Democrat third party candidate will run in 2012 against The Clown™ and will do to him what Perot did to George H.W. Bush in 1992: split the vote, and make the other candidate, the Republican, the winner.

My prediction on this date. Mark it down, and tell me after election 2012 why I was right.

Now now now guys! The Clown didn’t do it alone – first he had a tremendous amount of help, really couldn’t have done it, without Nancy and Harry, and the Congress kids gang, and of course, who can forget the MSM, and finally a significant number of people who voted in the last election.
If anything he’s the cumulative result of massive liberal insanity and backlash against George W. Bush.

Oh…sorry, if Sarah Palin does what I think she’ll do, and does as well as I think she’ll do, you’re looking at 4 more years of Barack H. Obama, President of the Late Great United States.
It’s gonna look a lot like the election of 1860 (that would be…the last Civil War).

Are you willing to cut America’s overseas commitments, military bases and involvements not directly needed to physically defend this country? Or do you just want to cut the programs you are ideologically opposed to, while rationalizing keeping the ones you like?
This is precisely what I mean when I say America is in decline. We have unsustainable budgets, a political climate that is fragmented and focused on self-interest (if only we’d listened to President Carter’s July 1979 speech, and started solving this when our budget deficit was $28 billion, and total debt just over $600 billion), and a public that will become discontent if major budget cuts are made.
Blame Obama if you wish, but it’s really Reaganomics that brought us here. Obama has to deal with problems so intense that anything he does will lose him political points. But he starts with a groundswell of support that means perhaps he can motivate the American people to work together to solve these problems and build a stronger future. You can help on in that regard, or you can throw partisan pot shots, trying to build up your “side,” but preventing the united effort that is needed to keep this decline from becoming a collapse.

Are you willing to cut America’s overseas commitments, military bases and involvements not directly needed to physically defend this country? Or do you just want to cut the programs you are ideologically opposed to, while rationalizing keeping the ones you like? And absolutely no fair bringing that “constitutional” stuff into it. Because we wise leftists have erased the difference between activities actually authorized by the constitution, such as defense, and stuff we like to do to gain more control over the serfs, er, I mean, citizens.

This is precisely what I mean when I say America is in decline. We have unsustainable budgets, and don’t start up with how most of that is the result of leftist policies passed by Democrats, just don’t start! Medicare, Social Security, Medicaid, and all the other entitlements were absolutely necessary, do you hear me! As opposed to that defense stuff, as I said earlier, which we really don’t need except for a small amount for ceremonial purposes. Because war is just icky and no civilized person ever supports it. Except against Hitler, and he’s dead.

Our political climate is fragmented and focused on self-interest. Of course, on one side, the self interest nicely dovetails with wonderful leftist policies, while on the other side the self interest is in passing programs preferred by dense righties, such as money for defense, and that’s obviously bad. If only we’d listened to President Carter’s July 1979 speech, and started solving this when our budget deficit was $28 billion, and total debt just over $600 billion, and when our inflation was 12%, and our unemployment was 12%. Now, there’s a man who understood economics! We should have kept Carter’s 18% interest rates on houses too – that would have certainly stopped the housing crisis. And no fair bringing up the whole thing about Democrats forcing loans to people who couldn’t afford them!! That was another wise leftist program that was created from the best of intentions, and it’s always the fault of you dense righties when things go wrong! It says so right here in the holy writ of post-modernism!

We have a public that will become discontent if major budget cuts are made.
Blame Obama if you wish, but it’s really Reaganomics that brought us here. Yes, and it’s definitely not Democrats who created all those programs that got people hooked! No, no, no! It’s Reagan’s fault, I tell you! He was odious and nasty and concealed what a horrible person he was beneath that cowboy actor facade. He was evil, just like most dense righties who get to positions of responsibility, and it’s his fault, not the Democrats who passed all the spending programs. And stop bringing up all that stuff about how much his tax cuts increased revenue and the Democratic Congress doing the spending during his term. That’s just not fair, because Democrats like Carter are always wise and good, and Republicans are nasty and evil and bumbling incompetents who always cause problems!!! I decree it!!

Obama has to deal with problems so intense that anything he does will lose him political points. But he starts with a groundswell of support that means perhaps he can motivate the American people to work together to solve these problems and build a stronger future. But that doesn’t mean working together to trim or eliminate leftist programs that caused the mess in the first place, so put that thought out of your heades right now. No, it means passing more taxes on the rich, and cutting your own consumption (which is nasty and evil and you’re better off without it) and bending over and taking anything Obama wants to do to you. You can help on in that regard, or you can throw partisan pot shots, trying to build up your “side,” but preventing the united effort that is needed to keep this decline from becoming a collapse. Yes, denying Obama’s programs is just partisan posturing, but supporting them is high-minded and good and honest, and I just don’t understand why you dense righties can’t see that. After all, Obama and we other wise leftists have decreed it!! All the media guys agree with us! But you thick, thick righties and your “freedom this” and “constitutional that” just don’t get it.

So I have to keep coming here and educating you. Have you noticed that I’ve devoted more time to that lately? I’ve been so, so concerned about you, and it has nothing to do with the fact that I’ve been feeling a bit down and need to pump myself up by lecturing to dense righties, so stop saying that! I do not either need self-validation by finding someone to talk down to! I don’t, I don’t, I don’t! I’m perfectly normal, and it’s you dense righties who are twisted and sick, especially the ex-military types who are front page posters, because we all know just how warped they are. Basket cases, all of them.

If only we’d listened to Carter?!? Wow. So, I’m just guessing here, just speculating, correct me if I’m wrong; you sound like you would have or do support the policies of FDR, LBJ, Carter, and Obama, and think things are just peachy over in Great Britain.
Reaganomics brought us here? If by “here” you mean over 25 years of unparalleled growth and success, then that would be correct. But I suspect that when you say “here”, you mean to tell a lie, and blame the total economic failure of FDR, LBJ, Carter, Bush (who, despite what the media have to say, is a LEFTIST), and soon Obama on “the Free Market”.
Our market hasn’t been free since the 1930s. Earlier than that, but it was FDR that brought strict adherence to authoritarian socialism in this country.
If you’re not intentionally telling a lie, then you’re a fool.

The big issue is the decision to give government a much bigger slice of GDP to play with and to do it for the long-term.
I don’t want government to have a bigger role in my life, nor do I think the government will handle its bigger slice more intelligently than the people who would otherwise do so, nor do I think the economy will grow as fast.
As we get richer, we should have less need for government, because we have more resources to solve our own problems.
Paying for what we spend is also a big issue, but it’s secondary to spending.

Well Greg, I’m focusing on a specific speech Carter gave on July 15, 1979. I’m not sure what FDR, LBJ, and the others have to do with this. I’m saying that in1979 that recession left us with some stark choices. At that time we had debt of $640 billion, and a federal budget deficit of $28 billion. Instead of rebuilding infrastructure and finding a way to remain productive, we went into massive debt and deficits, meaning we are now $12 trillion in debt, have seen jobs go overseas, and have been producing less than we consume, forcing the current imbalance. We had a thirty year party and now the mess will be much harder to fix. (And both parties share blame, politics is not about choosing a team and just supporting it … at least, it shouldn’t be.)